Redundancy

When employers need to reduce their workforce they will often make certain employees redundant. Whilst many consider this as a form of dismissal you may be entitled to a number of certain rights, to include a consultation with your employer, the option to move to a different role within the firm and of course redundancy pay.

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A SUMMARY OF THE LAW

Generally, when it comes to redundancy, two years’ continuous service is key. Employees need two years’ continuous service to qualify for statutory redundancy pay and also in order to challenge your redundancy and claim unfair dismissal (link to unfair dismissal page). The only exceptions would be if you felt your dismissal was automatically unfair (e.g. because of your pregnancy) or if you felt you had a potential discrimination claim, as neither of these claims have a length of service requirement.

Redundancy Pay

Redundancy pay is calculated as follows:

• 0.5 week’s pay for each full year of service if you are under 22.
• 1 week’s pay for each full year of service if you are between 22 and under 41.
• 1.5 week’s pay for each full year of service if you are 41 or over.

Statutory redundancy payment is capped at £450 per week and the maximum number of years that can be taken into account is 20.

If your employer experiences financial difficulties and is unable to pay you your statutory redundancy payment, you may be able to make a claim through the Redundancy Payments Service with a view to seeking payment from the National Insurance Fund.

Redundancy and Unfair Dismissal

Redundancy is a fair reason for dismissal. In order for a redundancy dismissal to be fair, it must fall within the statutory definition of redundancy and your employer must also follow a fair process. The statutory definition of redundancy covers situations where you are dismissed wholly or mainly because:

1. your employer has ceased or intends to cease to carry on the business for which you were employed or ceased to carry out that business in the particular location in which you were employed (e.g. business or workplace closures); or
2. the requirements of your employer’s business for you to carry out work of a particular kind, or carrying out that work of a particular kind in a particular place have diminished have ceased or diminished or are expected to do so (e.g. a reduction in the need for employees, although the number of employees in the organisation as a whole could remain the same).

It is important to note that cost cutting measures to reduce top tier staffing can also fall within the definition of redundancy.

Even if your employer is unable to establish redundancy as the reason for dismissal, you could still be dismissed fairly under the head of “some other substantial reason”. This can apply in a business restructure scenario.

In order to demonstrate that they have followed a fair process your employer should:

• Determine a pool for selection amongst employees.
• Consult with individuals in that pool.
• Apply objective selection criteria to those in the pool.

Challenging the pool can prove tricky, provided your employer can demonstrate they have genuinely applied its mind to the choice of pool, it will be difficult for you (or indeed a tribunal) to challenge this.

There is for instance no legal requirement that a pool should be made up of more than one employee.

When it comes to consultation, if your employer is making 20 or more employees redundant over a period of 90 days or less, they have a duty to collectively consult under the Trade Union and Labour Relations (Consolidation) Act 1992. This means informing appropriate employee representatives and notifying the Secretary of State (i.e. the Department of Business Innovation and Skills). If your employer was to breach this duty, a Tribunal could award up to 90 days’ pay to each employee. Individual consultation applies regardless of the number of employees being made redundant.

In order for redundancy to be a fair reason for dismissal, it must be a last resort, so your employer should hold off on recruiting new staff, consider dismissing contractors and agency workers and invite voluntary redundancies. Your employer is also obliged to consider whether there is any suitable alternative employment for you.

The stringent requirement for objectivity when it comes to determining a selection pool does not, however stretch to the recruitment procedure in choosing which employees to place in alternative roles so proving an employer has acted unreasonably in so doing is quite difficult to prove. Also, when it comes to suitable alternative roles, your employer is obliged to give those on maternity leave priority. If you are offered a suitable alternative role which you unreasonably refuse, you could lose your right to statutory redundancy pay.

Your employer could also use “bumping”. This is the process of moving a potentially redundant employee into another role which “bumps” the person in this other role out, rendering him dismissed by reason of redundancy.

It must be stressed that whilst procedural fairness is important, the scope to negotiate on the basis of procedural issues alone can be limited. This is due to the fact that, should you hypothetically take the case to tribunal, any compensatory reward may be reduced to reflect that you would have been dismissed anyway, even if a fair procedure had been followed.

When it comes to redundancies further to e.g. a merger or business takeover, your employer should always bear in mind The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) It is unfair to dismiss/make redundant an employee because of the transfer itself or for a reason connected with the transfer, your employer does have a defence if it can provide an economic, technical or organisational reason for your dismissal.

The concept of an ‘ETO reason’ is, however quite far-reaching. The law when it comes to protection from dismissal under TUPE continues to be a grey area and there is often scope for employer’s to argue ETO reasons in the face of unfair or constructive dismissal claims. If you feel that your redundancy dismissal does not fall within the statutory definition of redundancy, or that your employer has failed to follow a fair process, you may have a claim for unfair dismissal (link to unfair dismissal).